Could Universal Social Charge Save Google and Government Blushes?

Unnerving and challenging remarks emanating from both sides of the Atlantic have sandwiched our government into a position of having to deny that this country is a tax haven for multinational corporations. No lesser figure than Senator John McCain, a former US presidential candidate has, on more than one occasion, described Ireland in the US Senate as a tax haven for its treatment of tax collection from multinational American corporations located in this country.

While Irish politicians of all political parties have tip toed around multinational coperations for fear that they will withdraw investment and jobs from the country, politicians in the United Kingdom and the USA have launched a broadside on massive tax avoidance by multinationals such as Starbucks, Google and Apple. The debate is no longer about Ireland’s corporation tax of 12.5% of profits, but the reality that nothing like that amount is paid on the profits which are routed through Ireland, or derived in Ireland in the case of both Google and Apple. These are only the two named corporations but the US Senate revealed that Ireland hosts more such companies than any other country.

Our government is now in the embarrassing situation of defending the country upon which they are willingly imposing austerity in the face of allegations from two of the most powerful economies in the world accusing them of colluding with companies and making our country a tax haven.

Denials by the Taoiseach, Tánaiste and other ministers cut no ice with these powerful political figures internationally who can retort by simply quoting the actual tax collected as against the actual profits declared. When this matter was raised in the Dáil by an independent TD, based on our own Revenue Commissioners revelations, the same ministers stonewalled him and the media treated it as a fifteen second wonder and then dismissed it as left wing propaganda.

The figures do not lie!

The Universal Social Charge was introduced by the late Brian Lenihan as part of his emergency response to the collapse of the Irish economy. In his budget speech of 2009 he first introduced the concept of a universal social charge which, he said, would be paid by everyone at a low rate on a wide base as a collective contribution to public services. A year later, in his budget of 07 December 2010, he replaced both the income levy and the health levy by the universal social charge which, he said, required that everyone made some contribution, “however small” to the provision of services. He only applied it to income tax paid by PAYE workers and self-employed.

Registered companies in this country, in legal terms, are persons for the purpose of law. The concept spoken about by the late Brian Lenihan that everyone should make a contribution to the recovery of our economy and provision of public services could and should logically have applied to these massive multinational corporations. Indeed, it is quite astonishing that at no point has any government, since the collapse of the economy, even considered imposing any form of levy on that sector. Instead it has yielded to lobbyists who are very quick out of the traps whenever any economist or commentator suggests any form of taxation on them.

Such corporations are now under international pressure to behave in a proper, responsible fashion in the countries in which they are based. Enlightened politicians albeit that they come late in their enlightenment, are now recognising in the UK and the USA that the argument that these corporations bring employment and wealth to a country should not excuse or relieve them of paying their contribution to the many public services and resources they have access to. Those corporations are now, although not breaking the law, finding it increasingly more uncomfortable to appear before public hearings of parliaments defending the minimal tax they pay in any country across the globe. Unfortunately for this country they have embroiled us more than any other in their clever schemes of tax avoidance which clearly they see as being easy to manipulate in the context of our revenue laws.

There is a solution. Google, Apple, Starbucks and the many other multinational corporations can behave responsibly and, if not through a voluntary agreement with our government then through legislation, be subjected to the universal social charge which all other income earning persons in this economy are subjected to.

In doing so they would be unlikely to exceed the 12.5% which our politicians claim they get from them in the first place, internationally they would restore their reputation and in terms of the Irish economy they would greatly boost the prospect of us getting out of our bailout status without further damaging the fabric of our society and the state’s ability to provide decent public services.

‘Universal’ means all. The principle enunciated by the Minister for Finance of the time when the universal social charge was implemented, seems to have gained community wide acceptance. Yet the highest earning legal persons registered in this country are not subjected to the levy. It is time for the multinational corporations to come to the table which they have studiously avoided and make a contribution to reversing Ireland’s dire financial position. They can come good even at this late stage if not in our interests, in their own.